If you've been following EU writers and other sellers of "digital services" on Twitter lately, you might be aware of something called VATMOSS. The thing is, you might not. It's about to become law on 1st January, but HMRC and other tax authorities seem to have been particularly lax on actually telling anyone about it.

There are a vast number of links flying around about it (and I'll collect some together when I get the chance) but here's the short version: instead of using the seller's rate of VAT, purchases will use the buyer's. This is not a particularly big deal by itself, but here's the kicker. The VAT registration threshold from 1st January will be nil.

Yes, that's right. If you run a hobby business selling digital copies of knitting patterns from your kitchen table, you will be required to sort out VAT as soon as you sell anything for one unit of the currency of your choice.

There are three ways to approach this: 1) become VAT registered in any country in which you trade in the EU (there are 27 to chose from); 2) if you're in the UK become VAT registered in that country only and use their VAT Mini-One-Stop-Shop (VATMOSS - I don't know if other countries in the EU have their own version); 3) use third parties (eg Amazon) who do all this for you.

Actually, there's a fourth approach: stop trading. I'm hearing a lot of people on Twitter saying the burden of VATMOSS is pushing them down this route.

Here are the problems with the first three options:1) Becoming VAT registered in 27 countries requires a lot more time and admin than most micro-businesses have the capacity for, or the cash for if it comes to hiring an accountant.2) Becoming VAT registered in only the UK still requires the burden of quarterly VAT returns, something which most owners of micro-businesses don't have the time or cash for.

In additional, both of these options come with the additional burden of having to prove the location of the buyer. Traders will need to collect 2 different non-contradictory pieces of information about where the buyer lives. Not only is there a logistical problem with this - particularly as Paypal has stated that it would be in breach of data protection to provide this information at all - but also sellers may be required to register for data protection in any of the EU countries they sell in. This is not something that sole traders can support. I'm not sure consumers will be happy with their personal details sitting on someone's laptop on the kitchen table for a decade, either.

3) As far as I can tell - and there hasn't been confirmation of this, along with a lot of other things in this clusterfuck - sellers using a third party are expected to check that it is compliant with the new VAT rules. Amazon sent an email earlier this week to confirm it will be. I've contacted both Smashwords and Draft2Digital on Twitter to find out if they'll be compliant come January 1st. Neither has answered, which I assume is a no.

Oh, haven't I mentioned? The EU somehow expects this to be enforceable worldwide. I honestly don't see how the EU expects to police this, or indeed to force third parties outside the EU to be compliant with the new rules. For a lot of these third party sellers, the easiest option will be simply to stop trading into the EU at all. I expect this to be the route most of them take. America, China, and India are big enough markets that they can live without the digital backwater the EU is about to become.

The fifth option (and apologies for this becoming a bit like the Spanish Inquisition sketch) is to stop trading in the EU. I'm guessing a lot of the smaller marketplaces will just do this. It may or may not be illegal for EU businesses to go down this route - and then we're back on ceasing trading.

I saw something on Twitter yesterday (apologies I didn't keep the link) that Google has changed the Terms and Conditions of its Helpmeets that you can no longer charge customers in the EU.

If Google aren't prepared to deal with the VAT changes what the hell chance do the rest of us have?

What's making this whole situation worse is that November was the first most UK micro-businesses heard of it. I've been filling in tax returns as a sole trader for the last seven or eight years, and I've yet to hear anything from HMRC about the new rules I have to follow. I found out about it on Twitter. I don't know how traders who aren't on social media are going to find out, since the mainstream media isn't bothered by it and no one in HMRC or the government seems to want to do it.

There is a petition on Change.org to ask for the VAT threshold to be maintained so that micro-businesses aren't affected. It needs another three and a half thousand or so signatures (it already has in excess of 11k) so please consider signing it if you know anyone who'll be affected by this and haven't already. Vince Cable has already responded, but he clearly hasn't looked at the issues involved. His response boils down to "very few businesses will be affected and this was communicated ages ago". An independent survey (link when I find it - this was a couple of weeks and a cold ago) suggested that actually 250,000 business will be affected in the UK alone. And HMRC has admitted it only consulted businesses that were already VAT registered, which is a bit like banning sausages and only telling vegetarians.

At this point it's becoming impossible to tell if this is honest and damaging incompetence, or a deliberate attempt to put the uppity proles back in their place working for other people instead of themselves.

There's also a survey aimed at the EU as a whole, to collect data about the businesses that will be affected. Again, please consider signing if this is you.

This is going to affect pretty much everyone, even if they're not direct sellers. I only sell via third parties, but will need to take my books from Smashwords by the end of the year. I also need to review if it's viable to keep them on Amazon at all. Although they'll be compliant, the differing VAT rates - up to 27% in some cases - will mean either having to hike up the price of books to compensate, or lose the difference from already tiny profits. I'm not honestly sure it's worth it, and I'm super glad I didn't give into the urge to redo my ebook covers earlier in the year.

It doesn't end there. The plans are to roll this out to physical products in the next year or two, at which point you can say goodbye to POD via anyone but Createspace, and to craft sites like Etsy or Folksy. So if you're a direct seller of craft items, or sell through third parties who don't already deal with the VAT for you, you might want to make your voice heard now, before your business is destroyed as well.